Changes permitted by an express contract term

The 2014 Regulations introduce an important new power for employees to make transfer-related change. Regulation 4(5)(b) of new TUPE says that TUPE does not prevent an employer making changes under an express contract term, even if the reason for the change is the transfer.

In other words, if the employment contract contains an express contract term allowing the employer to make unilateral changes to contract terms, the employer can go ahead and make these changes even though they are a direct result of the transfer.

As the 2014 BIS TUPE guidance makes clear, employees cannot waive their rights under TUPE, so if an employer tries to insert a contract term giving power to make future variations, then if the sole or main reason for agreeing that power is the transfer, it will be caught by the general restriction on contract variation and will be void.

The BIS guidance also states that even though a transfer-related variation is permitted by the employment contract, this does not prevent employees resigning and bringing a claim based on Regulation 4(9) of TUPE. For more information see page 32.

There has been a marked increase in the use of express contract terms giving the employer the right to make unilateral changes to the employment contract. Some are very widely drafted. Perhaps the most notorious example is the case of Bateman v Asda Stores Limited [2010] UKEAT/0221/09. In this case, ASDA was allowed to rely on a term in its staff handbook permitting unilateral changes to employment terms “to reflect the changing needs of the business” to enforce unilateral changes to pay arrangements at the supermarket.

Courts and tribunals have established some important principles governing the interpretation of these express variation clauses. For example:

• an express term permitting unilateral contract change cannot be implied. It must be express – i.e. written into the contract;

• it must be agreed to;

• it must be clear and unambiguous; and

• any ambiguity will be interpreted restrictively, against the interests of the employer.

New TUPE does not take away the requirement for the employer to follow these basic rules.

One particular area of law where new Regulation 4(5)(b) is likely to have an impact is that of express mobility clauses, i.e. terms giving the employer the contractual right to require the employee to relocate. Regulation 4(5)(b) suggests that in future, an employer (transferor or transferee) will be able to rely on a valid contractual mobility clause to require an employee to relocate, even though the reason for the relocation is the transfer. Note that this kind of term would be void if it was inserted into the employment contract in the run up to a transfer deliberately so as to make it easier to avoid TUPE.

An employer’s right to rely on a valid mobility clause will be subject to the employee’s right to resign under Regulation 4(9) of TUPE. However, a change in location will no longer generate an automatically unfair reason for dismissal (Regulation 4(5A) of new TUPE, see page 33).

Any mobility clauses must always be agreed and must comply with all the requirements of the general law governing the employment contract. These are summarised in the LRD booklet Contracts of Employment, 2013 (www.lrdpublications.org.uk/publications.php?pub=BK&iss=1685).

As always, tribunals must implement TUPE so as to achieve the main purpose of the Acquired Rights Directive — to protect the interests of employees on a transfer (see page 8). Express mobility clauses should be interpreted restrictively and any ambiguity must always be resolved against the interests of the employer (Tapere v South London and Maudsley Hospital Trust [2009] UKEAT 0410/08/1908, Morris Angel & Sons Limited v Hollande [1993] IRLR 169).